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Financialization in India Could be Coming of Age - ABSLMF Blog

Financialization in India could be coming of Age

Sep 24, 2019
6 mins | Views 8783
Mr. Bhavdeep Bhatt

We are living in a network and platform world wherein an ability to harness ecosystem is rewarded much more than an access to natural or financial resources that dominated in earlier era. In our domain, Market perfectly exemplifies this network effect: the more people use it, the more useful it gets.

Why and how is this market-network in India building? We have seen a significant growth in financialisation of Savings in India in recent years. It was triggered by amazing efforts of financial advisors over the years, and well supported by investor education efforts of AMCs, demonetisation, lower historic returns from real estate, gold, deposits, and of course changing attitude from ownership to experience - say rent rather than own houses and cars. Implying more disposable income. Now with low and falling rates, we will see an acceleration in transition of savers into investors. Globally, we have never seen a transition from traditional investments to capital markets reversing! It’s one way, because it’s evolution. Notwithstanding the last 18-20 months of rocky ride, investors are well served by Mutual Funds across asset categories over a long period. We see that long term investors may find Mutual Funds ‘a comparatively better option for their wealth creation, regular income and tax savings needs.

Cut it to the market scenario: all market cycles are different, in the same way. There is an excess of either pessimism or optimism...seldom does market reflect true intrinsic value of underlying businesses. Currently market is in a pessimistic zone with small caps down by 45% from peak and large caps (ex-certain growth stocks) trading at 2015 levels. To drive economic growth, so far Government has adopted the path of ‘governance reforms’ like Goods and Service Tax (GST), Insolvency and Bankruptcy Code (IBC), Real Estate Regulatory Authority (RERA), Bank Recap rather than ‘fiscal stimulus’ like tax cuts or aggressive MSPs (Minimum Support Price). This has set us up for the road less travelled - short term pain for long term gain. It also means slower pace of growth revival. It’s heartening to see retail investors not panicking despite short term disappointment in returns.

Though Indian savers and investors have yet not adequately explored the power of fixed income solutions of Mutual Funds. We believe that despite with bank rates being low and set for a further drop, retail investors could find debt mutual funds as an alternate for their income needs. Credit Risk Funds will again be back in favour and will prove to be a secular asset class. The ongoing trend of favourable resolutions of certain credit events occurred over the last 1 year is expected to not only restore but also reinforce the confidence of advisors and investors alike in this asset class. We at Aditya Birla Sun Life AMC are committed to provide a dependable solution in this category for an investment horizon of 3 years or more.

We suggest our retail investors and Investment Advisors to benefit from our unique investment solutions like Aditya Birla Sun Life Century SIP in all our equity funds.

After all key to successful investment experience lies in assessing Return Potential rather than only past Return Performance.

Happy investing and happy advising!

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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